GREY:STPJF - Post by User
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Awardedon Mar 24, 2014 6:44pm
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Post# 22361615
RE:Welcome surprise
RE:Welcome surprise
STP management has not said anything about going back to monthly updates. However, they presumably will give an update if some material decision has been made. In the case of the latest news release, the material information was the decision to apply ICD’s to all well pairs. A decision from the strategic review would also be a material decision worthy of an interim news release. That being said, I hope they do return to monthly updates.
Regarding the analysis from TD, a little bit of history is required to put their ideas in context. On Dec. 12, 2013 after the negativity associated with the strategic review announcement, they lowered their 12 month target price ($1 to $0.55) at a time when the STP price had declined to $0.12. They wondered whether the market had overreacted.
By February 11, 2014 after a disappointing Q2 results, TD became pessimistic. Even though they recognized the favourable ICD test, they were concerned about STP being able to raise an estimated $65-100 million. They changed their rating to Speculative Hold (12 month target of $0.15 when the price was $0.16).
In their latest report (March 18), TD changed the rating to Speculative Reduce (same 12 month target of $0.15 when the price was $0.28). While recognizing further positive results from ICDs, they continued to be more concerned about short term liquidity. I think it is important to note that the change to “Speculative Reduce” was prompted by the market price ($0.28) getting far beyond their 12 month target price ($0.15). Anybody who did reduce could have made money, because the price closed at $0.23 two days later.
While I am optimistic about (1) increased production as a consequence of ICDs and (2) eased capital requirements (unlikely need for $51 million to down space well pairs), I am concerned about (1) lacklustre results at Senlac and (2) whether the liquidity crisis can be solved.